Accessing credit scores and attempting to wade through the mysteries of credit applications can be confusing and complex.
Here, we summarize how credit reporting works and why credit scores differ between consumer reporting agencies.
We address the differences between TransUnion vs. Experian scores, reporting, costs and plans, and insurance.
You should also gain insight into how your financial history and behavior impact your credit score and use this information to your advantage.
How Credit Reporting Works
When you purchase anything on credit, apply for a loan, buy a vehicle or home on credit, or have retail store accounts, creditors report your spending and payment behavior to Consumer Reporting Agencies (CRAs).
Creditors typically report each consumer's transactions for credit at the end of the month to these CRAs. CRAs then use this information to compile credit scores for consumers.
CRAs use different models to calculate credit scores which generally range from 300 to 850 points. The higher the score, the healthier the consumer’s creditworthiness.
Credit reporting agencies look at various elements of consumer financial behavior. For example, they look at consumer history to calculate credit scores.
Issues such as how much credit consumers have and how regularly they pay their debts form part of their calculations.
Further considerations include the balances on credit cards concerning limits. How many credit applications consumers have recently made is another factor that CRAs consider, among other calculations?
Creditors then access this information when consumers apply for additional credit to determine whether they are viable risks to grant them more credit.
Creditors look at the current financial status of credit applications to check consumer risk and determine what interest rates they will charge and the loan period if they grant credit.
Differences in credit scores
Creditors generally report information to three leading credit reporting agencies, including Experian, TransUnion, and Equifax.
Because creditors share consumer information with these agencies at different times, credit scores vary between the agencies. Also, these CRAs use different scoring models, which affect credit scores.
Two scoring models include FICO and VantageScore. These companies may use the same model but apply different weights to credit status, payment history, and usage rates.
A breakdown of why credit scores vary among agencies includes:
- The credit scoring model and weighting they apply
- Scoring versions look at base and industry scores. Base scores indicate the probability of consumers paying their debts. Industry scores calculate the potential of repaying a specific debt.
- CRAs can only use the information that lenders provide them with to calculate credit scores. Lenders may provide credit information to one CRA and not another. In addition, they share information at various times, impacting the credit score across bureaus. Not all creditors share information with all three bureaus, providing another reason for credit score variations across CRAs.
- If you view credit score ratings from these three CRAs on different days, this also differs from the score you see.
- You may note errors on your credit report indicating an incorrect loan amount or see an application for credit for which you did not apply. These errors may reflect on one CRA but not on others.
These are the fundamental reasons why consumer credit scores vary across CRAs.
This article addresses the variations concerning Transunion vs. Experian to give you a better idea of how these companies operate.
Many people don't know that credit scores exist. If they are aware of credit scoring, they are dubious about its importance and impact on their lives.
Anyone who purchases anything on credit applies for loans, home mortgages, car loans, or other credit, will be influenced by CRA scores.
Read on to find out how TransUnion vs. Experian credit scoring works.
TransUnion provides free access to your credit score. This score is valuable in indicating where your financial strengths and weaknesses lie.
Credit service providers also use your TransUnion score as input into developing their own risk analysis.
A risk analysis of your financial health determines whether you qualify for a particular line of credit. It also determines how much credit you can apply for together with the terms and conditions of that credit.
These terms and conditions indicate the length of the credit that providers extend, the interest rate, length of time of the credit, and repayment terms.
Most Consumer Reporting Agencies (CRAs) will score your credit risk from low to high, with the highest score indicating the lowest risk.
When your score is high, you qualify for better credit terms. In other words, because you are a lower risk when you have a higher credit score, your interest charges reflect this situation.
TransUnion uses the following ratings to rank credit scores:
- Poor: 0 to 486
- Unfavorable: 487 to 526
- Below average: 527 – 582
- Average: 583 to 613
- Favorable: 614 – 680
- Good: 681 – 766
- Excellent: 767 to 999
Experian receives information from credit providers about your financial accounts and uses their scoring model to develop a FICO score for each consumer.
In addition, this company creates a generic or a custom credit score.
The company generates generic scores that individual lenders can use. Generic scores are helpful as a general indication of credit risk.
Custom scores are valuable in specific industries and lenders who want to know more about your spending behavior.
Custom scores are also helpful when financial institutions assess your risk for mortgage bonds, for example.
Experian’s FICO® Score works according to the following rankings:
- Very poor: 300 to 579
- Fair: 580 to 669
- Good: 670 to 739
- Very good: 740 to 799
- Exceptional: 800 to 850
Experian uses credit score factors (as does TransUnion) to collect information when developing a FICO score.
Elements such as total debt, account types, late payment of accounts, and how old the accounts are all serve as inputs into creating your credit score.
The helpful thing about credit scores from these companies is that they show weak and strong areas.
When you know where your financial weaknesses lie, you can take steps to improve those areas. As you improve your economic behavior, you improve your credit score.
Ultimately, your credit score reflects the potential to repay debts and behave responsibly once a service provider gives you credit.
For example, if you're looking at long-term, large investments like buying property, then a high credit score means the creditor will offer you a competitive interest rate.
A competitive interest rate means you pay less over the long term than someone with a low score.
So, your credit score can either be an asset or an indication of poor money management behavior.
When you are aware of your credit score, you can take steps to improve it or keep an eye on accuracies in your report.
Here you can read about the differences and similarities in TransUnion vs. Experian regarding providing credit reports.
TransUnion essentially provides two free reports. One free report means accessing your credit history once a year.
The other involves viewing your free report and credit score once a year, free of charge.
Businesses can likewise access a report containing their financial history, but this report covers three years.
- Free individual report:You can register a free account with TransUnion andobtain a free report of your credit health once a year. In this free report, you get to see a two-year overview of your credit history.
This score shows lenders how you handle your credit, how regularly you pay your accounts, and whether there is any legal action against you.
You can also see whether anyone is using or has used your information to apply for credit and take steps to remove this error from your report.
- Business report: Like the private report, businesses can also obtain a record of their credit history. This history covers three years of financial transactions. In addition, you can see whether there has been any legal action against the company and track non- or slow-payment history on the account. Businesses can also see history relating to property or bond information in their TransUnion report.
- Car trade and retail value report: You can see how much your vehicle is worth or the actual retail value of a car you wish to purchase for a small fee.
Experian offers similar services as TransUnion regarding reports. With this company, you can:
- View current information: You can view the information that lenders see when analyzing your credit status. For example, you will see the credit accounts under your name, balances, the payment history, and any negatives listed in your report. You can also check account summary totals, your total debt, and personal details.
- Credit score factors: Experian provides a detailed list of the score factors that influence your FICO® Score, the mix of credit, new lines of credit, history length of accounts, total debt, and payment history.
- Monitoring: You get to monitor your report every day and receive notifications when changes take place. Monitoring helps you to detect any fraudulent activity using your identity. You also receive a message when a lender accesses your score, if you open a new account, update personal details or when there is a change in your public records.
- Experian Boost: This free service enables you to boost your credit score by updating your record with a positive payment history regarding utility bills. Credit repair services help to remove errors from your report but can't boost your score.
- Stay current: Experian updates your report monthly, which you can access by logging into your account. This feature is helpful because it can take a month or longer for some updates to appear on your credit record, including negative issues such as collections or bankruptcies.
- Online disputes: You can use this free service to correct mistakes on your report by contacting the dispute center, which will help resolve such errors.
Cost and Plans
TransUnion mainly offers free plans, while Experian offers paid plans to boost the security of your credit score.
TransUnion offers a couple of plans to help you protect your identity. The majority of their services come at no cost to the consumer.
- Credit report:Obtain your free credit report once a year.
- TrueIdentity: Monitor your credit record to detect early warning signs of fraud or identity theft, free of charge.
- True Credit: Obtain your credit score, report checks, and monitor at any time to check your financial profile. You can also access a credit lock and freeze and sign up for change alerts on your credit record.
- Score trending and simulator tool: Access the simulator tool for a small fee, around $19.95 per month, to check your credit health.
Experian offers different plans, and each plan comes with a free 30-day membership trial.
Note that you’ll need to provide your credit card information to access the free trials for paid plans only. Also, the monthly cost of Experian varies depending on the plan you chose.
Here’s a detailed overview of the Experian plans and their cost:
- Experian’s free credit monitoring service: It’s a free plan. You’ll get a dark web scanning, credit report, monitoring alerts, and a FICO score check every 30 days. Note that; there’s only a one-time scan for the email, phone number, and SSN.
- Experian IdentityWork Plus: Protect your identity and that of your loved ones. The monthly cost for this plan goes as low as $9.99 to about $24.99, depending on the number of people you want on the plan. For one adult, it is $9.99 a month, and you receive a 30-day free trial. After that, you can register up to 2 adults and ten children for about $19.99. With this plan, you get protection against identity theft, credit monitoring, 3-Bureau FICO score, surveillance of dark webs, alerts, and fraud resolution.
- Experian IdentityWorks Premium:A monthly cost of $19.99 to around $29.99, varying with your chosen plan. The $19.99 per month or a 30-day free trial covers one adult only. If you have a family, two adults and ten children cost $29.99 per month. This plan provides fraud resolution, daily FICO scores, protection against identity theft via monitoring, and credit monitoring. All credit scores for this plan are based on the FICO score 8 model or FICO bankcard scores. Surveillance of the dark web for your email, phone, and SSN for additional protection also forms part of this plan. This plan also allows you to lock or unlock your credit file.
The services of these credit reporting agencies are as effective as their security. Here are the security features you can expect from TransUnion vs. Experian.
TransUnion uses one of the most secure servers. They use a socket layer protocol for advanced protection and defense against Denial of Service (DoS) attacks.
End-to-end encryption for secure servers and communication when browsing the web means you won’t need to worry about your stolen or leaked credit information.
In addition, Experian uses a top-notch 128-bit encryption technique to encrypt ordinary text into cyphertext. This technique protects all your sensitive information.
Protecting yourself against identity theft and credit checks also entails having a good insurance plan that caters to uncertainties.
Thus, insurance is part of the solution for effective risk management.
Here are the insurance covers for TransUnion vs. Experian.
- TrueIdentity: This free plan covers monitoring of your account, viewing of your credit score and changes over time, complete credit profile access, and IDRecover to restore your identity in the case of theft.
Insurance cover for this plan equates to $25,000 per year, which is the only cover that TransUnion provides.
Experian provides the best insurance cover. It has insurance packages that cover eligible expenses such as legal fees (fraud resolution), lost wages during the process of identity theft, and restoration of identity.
However, their insurance services are only included for paid services. So, for example, Experian free credit monitoring has no insurance cover.
Here are the two insurance covers you’ll get:
- IdentityWorks Plus: Insurance cover of up to $500,000.
- IdentityWorks Premium: It has an insurance cover up to $1 million.